Anglo Irish report states developers' guarantees are of very limited worth
Personal guarantees given to nationalised lender Anglo Irish by Ireland's leading developers are now of "very limited value", the bank's annual report concludes.
The bank has witnessed the net worth of its borrowers being "eroded" over the last 18 months, the bank said in the report covering the 15 months to the end of 2009.
"As a result, recourse previously available under personal guarantees and through cross collateralisation is now of very limited value in protecting the bank's interests," the report acknowledged.
"The bank admitted that 20pc of its entire loan book was now "impaired", amounting to €14.5m.
The bank is suffering a number of problems in getting value out of its loans, including less cash flow from borrowers, less net worth among borrowers and long delays in selling assets.
Even loans that are currently not in default and where the borrower is paying their interest have in some cases to be classified as "impaired", the bank explained in the report.
But the main problem is that security underpinning loans has plummeted in value.
"The value of the security in a large number of cases is no longer sufficient to fully secure the loan in the event of default,'' said the bank in the report.
The bank remains highly sceptical about any recovery in the property market in Ireland.
"Property markets have continued to be highly stressed with very limited activity and uncertain pricing levels, particularly in Ireland which experienced a fall of approximately 20pc in property values in that period," it said.
Some pieces of land have fallen by 90pc, the company admitted, and there is an "overhang'' of supply in both the commercial and residential markets.
The bank's two main markets outside Ireland -- the US and the UK -- performed better than Ireland, with the US in particular suffering the least.
The bank did take a hit, however, on its development land assets and hotel investments in the US.